These are exactly the steps we took to get out of 15,000$ worth of credit card debt that we racked up (most of it was 25+% interest rate)
This can go for any kind of high interest rate debt
- Credit cards
- Car loans
- Personal loans
- Anything else
For this example we’ll be using credit cards because most have a ridiculously high interest rate
Step 1: sit down and gather all your credit cards
Save one or two of them (the ones w the lowest interest rate) and put the rest in a safe place. [If you lack discipline just cut them up.]
Moving forward, any new charges to these cards must be paid off because we are not incurring any more long term debt!
Step 2: Find a way to put extra money towards these cards per month.
We were taking 30% of every paycheck and putting it towards our cards. We worked valet for tip money and as a realtor for transactions. Some months we only paid off an extra 100$, some months it was $1,000 plus.
The point is, It could be as small as 10$, just plan on putting something extra, on a monthly basis, to these cards.
Step 3: apply the additional cash to the monthly payment to only ONE CARD.
You will now be paying the minimum on each card, plus the extra cash you came up with for ONE CARD
We picked the cards with the lowest balance on them. Each minimum payment was around 35$ so once we got rid of a minimum payment, we used that 35$ to go towards the next card and so fourth. (more on step 4)
You could pick the card with the highest interest rate instead.
See, most people pay only the minimum on each card and maybe a little extra to each card and the cards never get paid off – it’s to spread out and the interest rates are too high.
Step 4: Once you pay off a card, then pay the total amount you were paying each month to the next card.
Credit card one had a minimum payment of 35$
Credit card two has a minimum payment of 35$
Once credit card one is paid off, credit card two is now getting a minimum of 70$ per month plus the extra cash you’re putting towards that specific card (this process repeats until you are debt free)
Step 5: [optional] once all the credit card debt is paid off, continue the procedure with your car and house payments.
This is optional and really depends on you.
Regardless if you pull the trigger on step 5 you will be AMAZED at the shortened amount of time it takes for you to become debt free.
We did it within a couple of months – albeit our monthly expenses are extremely low to begin with
Others can do it as fast as 5- 7 years if they have major loans etc.
Debt free – a huge milestone.
Step 6: Once you are debt free, take the monthly amount you were paying on your very last debt and put that money towards investments.
These investments could be your retirement fund or saving up for a downpayment for rental real estate
Educate yourself, start small, and think big.
And that’s how simple it is to become debt free.
Joe DiAndrea 